Philly Fed Manufacturing Index Stronger Than Expected

The Philadelphia Fed’s survey of regional businesses hints at the beginning of a recovery for the malaised manufacturing sector.

The manufacturing sector has slumped in the second half of 2019, driven down by a slump in global demand for U.S. exports, the ongoing grounding of Boeing’s 737 Max planes, low energy prices pushing down demand for extraction equipment, uncertainty over trade, and the now-completed strike by General Motors workers.

On Thursday, the Philadelphia Fed said its index of business conditions rose to 10.4 in November, largely reversing the sharp decline in October. Economists had expected a more modest recovery.

Although the survey’s gauges of new orders, shipments, and employment all declined from October, these remain solidly in growth territory, pointing to underlying strength in the region that covers eastern Pennsylvania, southern New Jersey and Delaware. The survey suggests an acceleration of activity going into the end of the year.

Price readings showed an easing of inflationary pressures both in prices paid and prices received. But these measures remain positive and are unlikely to spur concerns over deflation.

The Philadelphia Fed survey’s six-month outlook index improved, indicating growing optimism. But the plans for capital expenditures declined, confirming ongoing weakness in this part of the economy.